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Why should you buy a Total Loss Gap Insurance policy?

The idea and concept of Gap Insurance is very simple.

GAP insurance is designed to fill the gap in your finances left following your motor insurers settlement for the car if it is stolen or written-off. There are several types of GAP insurance including 'Return to Invoice', 'Vehicle Replacement' and Finance Shortfall Gap.

Whilst it is great that there are different ways to protect yourself, it does beg a straightforward question - Which Gap Insurance is best for you?

The problem is that there may be no straightforward answer.

You see, nearly all vehicle purchases are different. Some vehicles are purchased outright, some are on finance. Some finance agreements have a large deposit, some do not. Some purchases are for heavily discounted vehicles or some may be for full list price on a new model in the market. You have to also consider what the future replacement cost may be, for example where you have bought a heavily discounted 'run out' model then the equivalent model in the future could be much more expensive to replace.

As you can see the choice of Gap Insurance policies can cause untold confusion and you could be forgiven for picking one that may not give you the best cover available for your particular purchase.

Which Gap Insurance?

When you are looking at Gap Insurance options for a vehicle purchased from a Motor Dealer then the usual two you may look at would be:

  • Combined Return to Invoice - to cover the gap between the motor insurers settlement and the higher of either the finance settlement or the original invoice price paid.
  • Combined Vehicle Replacement - to cover the gap between the motor insurers settlement and the higher of either the finance settlement or the replacement cost of the vehicle.

Unless you are buying your vehicle on a form of contract hire or lease hire where full ownership of your vehicle cannot pass directly to you, in most cases you will be offered either vehicle replacement or invoice styles of gap insurance.

These levels of cover may sound similar but they are actually very different.

The invoice gap insurance means that between your two insurance companies you will be paid the full invoice. Vehicle replacement is a little different as instead of protecting a fixed monetary amount, you are protecting the replacement cost of another vehicle the same as yours was on the day you first drove it home.

This means that vehicle replacement gap insurance relies on the fact that over a period of years vehicle prices fluctuate. In theory they can go down but most often than not year on year they will increase. But what if the manufacturer is just about to bring out a new model? What if a certain manufacturer is no longer in vogue?

Many different things can affect prices from lifestyle trends to global economies, so how can the average motorists accurately predict market forces when teams of trained analysts fail?

At total loss gap insurance we have taken the guess work out of gap insurance as our policy gives you the best of both worlds. If your vehicle is written off and the replacement cost of another the same age, mileage and condition as yours was on your first day of ownership is higher, then this is what your settlement will be based on.

If however the original invoice price is higher then no problem your policy will revert to invoice protection.

Please note that if you have purchased your vehicle on a form of contract hire or lease hire where you do not and cannot ever own the vehicle then the settlement will always be based on the amount outstanding on finance.